The participants in the Forex market
Forex is an international interbank market where operations are carried out through a number of financial institutions, such as Central banks, commercial banks, investment participants, dealers, brokers, individuals and other participants.
The main participants in the Forex market are large commercial banks and brokerage organizations. With the help of large commercial banks, money transactions are performed, and brokerage organizations act as an intermediary between banks, funds, etc. They influence the pricing of the Forex market by their actions, are called market makers (market makers or literally – making the market) and are active market participants.
Passive market participants, such as investment funds, importing and exporting companies, multinational corporations, and individuals (actually traders) perform trading operations of purchase and sale at quotes that were previously set by active market participants. Passive participants perform the following functions in the Forex market:
* investment funds use currency transactions to place their funds in securities of governments and corporations in different countries;
* companies-importers and exporters carry out mutual settlements under import-export contracts;
* multinational corporations, when moving funds between foreign divisions, perform conversion operations through commercial banks;
* private investors (traders), having, as a rule, relatively small capital, make speculative currency transactions through dealing centers.
The structure of the Forex market seems to be quite extensive, the importance of the market is confirmed by the number of participants, of which only a part uses the market for speculative purposes. Conversion operations on the market can cause significant losses for the participants ' capital, so in order to protect themselves, participants use a variety of currency market tools. These instruments include forward transactions, futures, options, etc.